Telephone bills to be 3 percent lower

Finally after 108 years a tax imposed to help found the Spanish-American war has been eliminated. According to this article on ZDNet “as of Tuesday, all phone companies selling long-distance phone service are legally required to eliminate the 3 percent federal excise tax on long-distance service, which had been established in 1898 as a luxury tax on wealthy Americans who owned telephones.”

After a long legal battle and strong urging from Congress, the Internal Revenue Service and the Department of the Treasury decided in May to discontinue the federal 3 percent excise tax on long-distance telephone service effective Aug. 1.

It also decided not to apply the tax to wireless, voice over Internet Protocol service, prepaid telephone cards and other bundled services. The IRS also said it would allow taxpayers to claim a refund in 2007 for taxes collected on those services retroactive to February 2003.

The last portion of the tax, pertaining only to local telephone service, remains in effect. But Verizon and other telecom companies are urging Congress to repeal the tax in total this year.

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